General Assembly: 82 (2008 Regular GA) - Chapter 1015 - Business corporations — distributions and business opportunities

Published: 2008-03-25

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CH. 1015CH. 1015



H.F. 2165

ANACT relating to business corporations, by providing for distributions and business oppor- tunities.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 490.640, subsection 7, Code 2007, is amended to read as follows: 7. Indebtedness of a corporation, including indebtedness issued as a distribution, is not con-

sidered a liability for purposes of determinations under subsection 1 if its terms provide that payment of principal and interest aremade only if and to the extent that payment of a distribu- tion to shareholders could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is actually made. 8. This section shall not apply to distributions in liquidation under division XIV.

Sec. 2. Section 490.831, subsection 1, paragraph a, Code 2007, is amended to read as fol- lows: a. That any of the following apply: (1) A provision in the articles of incorporation authorized by section 490.202, subsection 2,

paragraph “d”, or the protection afforded by section 490.832 if interposed as a bar to the pro- ceeding by the director, does not preclude liability. (2) The protection afforded by section 490.870 precludes1 liability.

Sec. 3. NEW SECTION. 490.870 BUSINESS OPPORTUNITIES. 1. A director’s taking advantage, directly or indirectly, of a business opportunity may not

be the subject of equitable relief, or give rise to an award of damages or other sanctions against thedirector, in aproceedingbyor in the right of the corporationon theground that suchoppor- tunity should have first been offered to the corporation, if before becoming legally obligated respecting the opportunity the director brings it to the attention of the corporation and any of the following apply: a. Action by qualified directors disclaiming the corporation’s interest in the opportunity is

taken in compliance with the procedures set forth in section 490.832, as if the decision being made concerned a director’s conflicting interest transaction. b. Shareholders’ action disclaiming the corporation’s interest in the opportunity is taken in

compliance with the procedure set forth in section 490.832, as if the decision beingmade con- cerned a director’s conflicting interest transaction; except that, rather thanmaking the disclo- sure as required in section 490.832, in each case the director shall have made prior disclosure to those acting onbehalf of the corporation of allmaterial facts concerning the business oppor- tunity that are then known to the director. 2. In any proceeding seeking equitable relief or other remedy based upon an alleged im-

proper taking advantage of a business opportunity by a director, the fact that the director did not employ the procedure described in subsection 1 before taking advantage of the opportuni- ty shall not create an inference that the opportunity should have been first presented to the corporation or alter the burden of proof otherwise applicable to establish that the director breached a duty to the corporation in the circumstances.

Approved March 25, 2008

___________________ 1 According to enrolled Act; the phrase “does not preclude” probably intended